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Whole Foods raises prices after highly-publicized cuts

Amazon has been trying hard to remake Whole Foods’s “Whole Paycheck” image, but facing rising costs, the premium grocery chain has increased prices on a number of items.

Whole Foods has raised prices on hundreds of items in the past three months, according to internal communications reviewed by Yahoo Finance. The price hike, first
reported by the Wall Street Journal
on Tuesday, took effect on a wide range of products in December and February, including Back to Nature boxed cereals and body care products. Whole Foods cited inflation as the major reason for the hikes.

The increase ranges from 10 cents to several dollars, according to the WSJ. Some product categories, like soap, detergent, and oils saw higher increases. Whole Foods said customers would on average see net price increases on fewer than 50 items out of 11,000 products in stores. An average Whole Foods store carries about 35,000 stock keeping units (SKU) in 2015, according to executives.

The price hikes come 18 months after Amazon acquired Whole Foods. On the first day it owned the grocery chain, Amazon cut prices on a number of popular items such as avocados and blueberries, generating buzz among shoppers and grocers. It offered even more in-store deals to Amazon Prime members, who can enjoy weekly discounts on a variety of items. The move to cut prices also pushed Whole Foods to
stop the expansion of its 365 stores
, Yahoo Finance reported last month.

“I think the focus has moved away from price because they just know at the moment is probably not a battle that they want to fight,” said Neil Saunders, managing director of retail at GlobalData. “It would mean that they have to reduce margin, they have to probably make a loss initially. And I think what they want to do now is to ramp up volume, open more stores, try for more ecommerce, things that drive efficiency and improve economies of scale.”

Whole Foods groceries are still much more pricey than Walmart.

The basket cost in Whole Foods is still significantly higher than other grocers. Whole Foods total basket prices were only 1% lower on average than one year ago, according to a January research report from BofA Merrill Lynch. It’s on average 31% higher than Walmart.

Some consumer-packaged goods manufacturers, including Procter & Gamble and Clorox, have pledged to raise prices due to rising costs. In the thin margin grocery business, Whole Foods can’t absorb all the cost but said it will continue to lower prices.

“Like all grocers, Whole Foods Market has experienced increased costs from suppliers due to materials, labor and transportation, and we’ve absorbed much of the inflation,” a Whole Foods spokesperson told Yahoo Finance. “Many prices have also decreased, and we continue to expand the number of promotions we offer to give our customers better value.”